Azure Power Global Limited
Azure Power Global Limited (NYSE: AZRE) is India's largest independent renewable energy generator. It uses its in-house engineering, procurement, and construction expertise to develop, build, and operate utility-scale renewable energy projects and manage the development and operation processes.
Why Should Investors Book Profit?
- Leveraged Balance Sheet: The company is more exposed to balance sheet risk than its peers, with a Debt/Equity ratio of 4.27x as of December 31, 2021, compared to the industry norm of 2.64x. Furthermore, its long-term debt-to-total-capital ratio was 70.3%, compared to the industry average of 37.2% for the same period. These leveraged financials put the corporation at risk of huge swings due to the slightest adjustment in interest rates.
- Regulatory Scrutiny: AZRE operates in India's highly regulated power generation industry, requiring the company to obtain and maintain various licenses, registrations, and permits to develop and manage power projects. If the company cannot receive such a license, it could harm its operation.
- Technical weakness: AZRE's price is sustaining below the downward sloping trend line and facing the same resistance on the daily chart. Furthermore, the momentum oscillator RSI (14-period) is currently at ~40.84 level, trading in negative territory. On the weekly chart, the price is trading below the trend-following indicators 21-period and 50- period SMA, which may act as a resistance level for the stock. A critical support level for the stock, is placed at USD 14.90, while the key resistance level is placed at USD 19.60.
Valuation Methodology: EV/Sales Multiple Based Relative Valuation
(Analysis by Kalkine Group)
* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.
Stock Recommendation:
AZRE's share price has declined 37.54% in the past nine months and is currently leaning towards the lower band of the 52-week range of USD 12.97 to USD 29.69. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 15.01.
Considering the company's highly leveraged balance sheet, regulatory risks, current valuation and associated risks. we recommend a "Sell" rating on the stock at the current price of USD 16.06, up 2.25% as of April 08, 2022.
Three-Year Technical Price Chart (as of April 08, 2022). Source: REFINITIV, Analysis by Kalkine Group
* The reference data in this report has been partly sourced from REFINITIV.
* All forecasted figures and industry information have been taken from REFINITIV.
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